Economic Crises and the Possibility of a Major World Crisis

Paper presented at the Eleventh International Communist Seminar

 Brussels, May 2-4, 2002

The strength of a party and a movement lies in its ability to systematise its thoughts in order to act decisively and strike with all its might at the weakest link in the chain of events, and in doing so, create the ideological, political, and organisational conditions to bring the proletariat to power the world over.  Therefore, a scientific understanding of the three principle contradictions facing the working-class movement today, both in isolation and in connection to each other, is the key that can unlock the door to a world socialist revolution.

The three principle contradictions that confront the working-class movement on the world stage, each of which originates from one source, the singularity of the capitalist system, are as follows:

·       The contradiction between labour and capital

·       The contradiction between the imperialists

·       The contradiction between the oppressed people and imperialism

To state the principle contradictions is an easy enough task.  To resolve them in such a manner as to bring the proletariat to power requires the creative and original application of Marxism to the nationally peculiar circumstances of every country.  In a word, it is a task that can only be fulfilled by the entire oppressed people through the process of revolutionising their lives.

Labour and Capital

The Second World War resulted in the greatest devastation ever witnessed in the history of humanity.  However, with the victory of the Soviet Union and the socialist forces, the establishment of socialism in Eastern Europe, and the Chinese revolution in 1949, the correlation of forces shifted decisively in favour of the socialist camp and sparked hope for millions more as they turned towards Communism and Marxism-Leninism.  Even the otherwise half-witted ideologist of the bourgeoisie John Foster Dulles was smart enough to realise that “capitalism was isolated in a sea of communism”.

In strategic terms, the United States represented the last line of defence for the capitalist system since it was the only power with the economic and military ability to stabilise capitalism.  Before the war, the world market was more or less equally dominated by four nations—USA, Britain, France and Germany. However, owing to the war, the devastation of Europe created the conditions for the unprecedented economic, political, and military dominance of the United States.  Britain’s domination was already declining (as evidenced by the falling proportion of British goods in world trade) but the war was the final nail in the coffin that shifted the world from Pax Britannica to Pax Americana. 

The United States used its newly acquired hegemonic position in an attempt to stabilise the capitalist system.  The bourgeoisie reasoned that an economic depression (such as the 1930s) could create the social conditions for a socialist revolution.  They thought that as long as they could stabilise the most violent oscillations of the system and simultaneously ensure some modest form of rising standard of living for workers within the imperialist centre they could save the capitalist system.

On the national level this task was performed by demand management and the welfare state, in other words Keynesian economics.  On the international level this task was performed by the Bretton Woods Conference, which set up the institutions of the Marshall Plan, the International Bank for Research and Development (that later became the World Bank), the International Monetary Fund, and the General Agreement on Trade and Tariffs (that later became the World Trade Organisation).

The management of the international financial system by the US and the state-management of the national economy within each country ensured the recovery of Europe and Japan and laid the foundation for a sustained post-war economic boom.  The United States guaranteed a market for its capitalist allies and through the rounds of GATT, tariffs were reduced from 60 per cent in 1934 to 4.3 per cent in 1987.  Similarly, Japan’s tariffs were reduced to 2.9 per cent and the European Union’s were reduced to 4.7 per cent.  From 1945 to 1973, world production grew at the average rate of 3.4% per annum.  World trade grew even faster.  From 1948 to 1966, it increased by 6.6 per cent per annum and between 1966 and 1973, it further increased at a rate of 9.2 per cent per annum. This growth in production and international trade represented the high point of the post-war consensus. 

In the 1970s, this post-war system (Bretton Woods and Keynesianism) came under increasing criticism especially in the US and Britain.  Stagflation, budget deficits, and a declining share of the world market were the principle objects of criticism.  The 1973 and 1979 oil price hikes owing to the formation of OPEC, combined with the international impact of US involvement in the Vietnam War, rendered the Bretton Woods system economically unsustainable.  Owing to the massive increase in input costs (especially of oil) the fixed exchange rate system could not be sustained and was abandoned in the early 1980s in favour of a flexible exchange rate system.  The new petrodollars in Western banks were the foundation of bank lending to the third world.  On the other hand, the new prosperity in the Middle East financially equipped the Saudi monarchy to launch a program of Islamic fundamentalist revival.  In the West, these conditions collided to create unemployment and inflation, that is, stagflation. The capitalist class was no longer ready to bankroll this unemployment due to the large budget-deficit and national-debt.

In the 1960s the world market share of US goods and services began to decline. As stated earlier, Britain’s share of the world market was already in decline since the beginning of the century.  Long-term unemployment and de-industrialisation in Britain and the US were blamed on increasing competition from Europe, and especially the Far-East.  In both countries, a more ‘cut throat’ form of capitalism offered the rich a more attractive means by which to regain the global dominance they had lost to Europe and Japan.

The ideological basis for this ‘cut-throat’ form of capitalism was laid by neoliberalism on the economic side, and postmodernism/post-structuralism on the social/cultural side.  Neoliberalism and postmodernism are two sides of the same coin.  Whereas the neoliberals prepared the ideological grounds for dismantling the Keynesian welfare state, the postmodernists prepared the ideological ground for the introduction of flexible work relations.  The central tenants of neoliberalism are well known—deregulation, privatisation, liberalisation, and in the context of the third world, the Structural Adjustment Program.  The central tenant of flexible work relations revolves around the possibility of laying-off workers during lean times and of hiring them back during prosperous periods.  In the name of critiquing Fordism, postmodernism justified such flexible work relations as providing ‘job-enrichment’ and freedom for greater individual choice.

What are the results of this latest assault of capitalism?

1)    Monopoly Power: We live in a world today where the top 1 percent of all multinational companies account for 70 to 80 percent of global trade (40% of which is merely intra-firm trade). Approximately, 90 per cent of all multinational companies are based in industrialised countries (Hirst., ch. 4).  The top 15 multinational companies control the world market in 20 key commodities: 90 per cent of the world’s trade in iron ore, wheat, timber, cotton, tobacco, pineapples; 80 per cent of the world’s trade in copper, tea, and coffee; 70 per cent of the world’s trade in rice; and 60 per cent of the world’s trade in oil.  The top 5 multinational companies account for 70 per cent of consumer durables, 58 per cent of cars, trucks, and airlines, 55 per cent of aerospace, 53 per cent of electronic components, and 50 per cent of oil, steel, personal computers and media industries (Brar, 1997).  Moreover, more than two-thirds of all trade is between three trading blocs--NAFTA, EU, and ASEAN (Hirst, 118).  The picture that emerges in the realm of production and manufacture is not too different from that of world trade.  A mere 1 per cent of all multinational companies own half the total stock of foreign direct investment (FDI)[1], 80 per cent of all international investment, and account for 30 per cent of the world’s output.[2]  The top 200 multinational companies employ less than 0.05 per cent of the world’s population but control over a quarter of the world’s Gross Domestic Product[3] (Brar, 1997). From 1995 to 2001 there have been a historic number of mergers and acquisitions that have further increased the monopolisation of the resources in the world.

2)    Finance Capital - Nearly two-thirds of all productive capital in the world is controlled by no more than the world’s 50 largest banks and diversified financial companies.  Meanwhile, deregulation combined with increased communication allows speculators to play at an international casino of finance capital.  Hot money flying in and out of stock markets and currencies has the ability to devastate not just economies but entire regions, as the East Asian currency crisis has demonstrated.

3)    A global crisis of over-production: Owing to deregulation, privatisation, and liberalisation, there has been a marked decrease in the effective demand in the world.  Structural Adjustment Policies in the third world and flexible work relations in the first world are contributing to a steep decline in demand.  At the same time, the introduction of new technology (silicon chips, computers, fiber-optics, internet, robotics and so on) has rapidly increased the capacity for production but also made millions unemployed.  Therefore, the increases in productive capacity are accompanied by a decline in the capacity to buy these products.  This tendency has produced a chronic crisis of over-production in the world capitalist economy today.  The October 1987 stock market crash, the East Asian currency crisis, followed by crisis in Russia, Brazil, and Argentina represent a global crisis of over-production. With the deregulation of state-managed capitalism, these oscillations (called business cycles by bourgeois economists) have become enormous and threaten to become totally unmanageable.  The imperialists have decided to allow sinking economies to sink because there is simply no political motivation to act otherwise (as was the case after the Second World War).  Furthermore, the imperialists are increasingly unwilling to pay the economic costs of such an act.  As stated earlier, the national and international debt are already high and an attempt to stave off the current crisis of overproduction by borrowing may possibly further aggravate this crisis.

Two mistaken conclusions must be fought with respect to the current economic crisis and the possibility of a world crisis.  First, it should not be assumed that this economic crisis is merely a transitional stage and that the capitalist economy will inevitably recover in a short period of time.  This represents the point of view of the bourgeois apologists of capitalism and imperialism.  Second, it should not be assumed that there is no way out for the bourgeoisie.  Lenin’s advise regarding the economic crisis after the First World War is quite apt in today’s context.  He argued,

“The bourgeoisie are behaving like barefaced plunderers who have lost their heads; they are committing folly after folly, thus aggravating the situation and hastening their doom. All that is true. But nobody can "prove" that it is absolutely impossible for them to pacify a minority of the exploited with some petty concessions, and suppress some movement or uprising of some section of the oppressed and exploited. To try to "prove" in advance that there is "absolutely" no way out of the situation would be sheer pedantry, or playing with concepts and catchwords. Practice alone can serve as real "proof" in this and similar questions. All over the world, the bourgeois system is experiencing a tremendous revolutionary crisis. The revolutionary parties must now "prove" in practice that they have sufficient understanding and organisation, contact with the exploited masses, and determination and skill to utilise this crisis for a successful, a victorious revolution.”

A successful victorious revolution can only be accomplished by isolating from the political field of struggle those elements within the working class movement that adhere to the opportunist point of view.  We know that social-democratic and opportunist economic doctrines are premised on the argument that the bourgeois state can ‘alter’, ‘reverse’, ‘halt’, ‘stop’ etc. the economic laws of capitalist development as discovered by Marx.  All parties, groups, NGOs, and organisations that adhere to this opportunist view, borrowing a phrase from Lenin, are better defenders of the bourgeoisie than the bourgeoisie itself.  These elements are the principle obstacle in the path of revolutionising the world working class movement.  Therefore, their influence must be theoretically, politically, and organisationally isolated and destroyed within the working class movement in order to revive Marxism all over the world.

The last three decades have witnessed the unprecedented growth of the social power of capital over labour.  The growing severity of the economic crisis is finding its resolution in the militarisation of imperialism and the drive to war in order to advance profits.  The possibility of an inter-imperialist confrontation raises questions about the contradictions existing between the imperialists.

Contradictions between Imperialists

In the world today there are three trading blocs—NAFTA, EU, and ASEAN.  Since the 1960s NAFTA’s share of world trade has declined in relation to the other blocs.  The US, therefore, is the most aggressive in attempting to win back this share lost to competitors.  In fact, each group of states is attempting to acquire instruments to win a larger market share and dominate the world.  So far this mad competitive drive for profits has not resulted in a direct military confrontation between the imperialists.  However, there are many signs pointing towards the possibility of such a confrontation. Japan has already begun to build a military.  The resentment in East Asia from the economic down turn and currency crisis can possibly be used to fuel an expansionist drive.  The bourgeois ideological currents in Europe that are ostensibly “critical” of US policy are attempting to promote European imperialism as an alternative to US imperialism.  The creation of International Courts of Justice and talk of a European led combat force to deal with “situations such as Yugoslavia” is designed to mask the development of the EU as an imperial power with a regular army that can rival the armed forces of US imperialism.  The military budget of countries demonstrates the growth towards militarisation.

Figure 1: Military Budget of Countries

Lenin said,

“The first imperialist war of 1914-18 was the inevitable outcome of this partition of the whole world, of this domination by the capitalist monopolies, of this great power wielded by an insignificant number of very big banks -- two, three, four or five in each country. This war was waged for the repartitioning of the whole world. It was waged in order to decide which of the small groups of the biggest states -- the British or the German -- was to obtain the opportunity and the right to rob, strangle and exploit the whole world.”

With respect to the possibility of an inter-imperialist war we must avoid two errors similar to the ones pointed out earlier.  First, to outright assume that an inter-imperialist war is out of the question is incorrect because this point of view misunderstands the relation between the economic system and the drive towards war.  Marxist-Leninists maintain with Clauzewitz that, “war is the extension of politics by violent means”.  Further, as Lenin said, “politics is merely concentrated economics.”  It is entirely correct to argue that the intensifying competitive drive between the imperialists is increasing the likelihood of an inter-imperialist confrontation in the future.  Second, it is equally incorrect to assume that the current economic crisis will immediately result in an inter-imperialist war.  The maxim that ‘the imperialist system inevitably leads to war’ does not imply that at any given moment and with every economic crisis the system will breakout in an immediate world war.  Such a view would be a mechanistic understanding of Marxism-Leninism. At the moment, the increasing economic tensions between imperialist powers are not resulting in a military confrontation between the imperialists but in an aggressive military expansion in the colonies.  The global economic competition between the great powers is resulting in the sharpening of contradictions between imperialism and the oppressed people.

Imperialism and the Oppressed People

Today, US imperialism is attempting to regain its global hegemonic position in the name of “war on terrorism”.  In typical capitalist style, this imperial power is also capitalising on its competitive advantage; its superiority in arms.  Its strategy is global in scope but three regions occupy its interest the most— Latin America, East Asia, and the Middle-East.  In order to stave off an economic crisis, it is pursuing an aggressive policy of expansion and control in each of these regions.

In Latin America, US imperialism is pumping 7.1 billion dollars under the pretext of “Plan Colombia” and the “War on Drugs”.  In reality this aid funds the war against the FARC-EP, Sundero Luminoso and other revolutionary parties.  In Venezuela evidence is emerging that the US abetted in the coup against Hugo Chavez and the enthusiasm with which they greeted this coup was quite apparent for the world to see.  However, the US imperialists might discover that their backyard, Latin America, has become a terrain of hardened thorns. 

US imperialism has dominated East Asia since the Second World War but it gained its first foothold with the colonisation of the Philippines during the Spanish-American War at turn of the 20^th century.  Today they are stepping up aggression in their oldest colony against the glorious NPA and the Communist Party of Philippines.  However, the US imperialists might discover another Vietnam in Philippines.

Central to the strategy of US imperialism is the domination of oil.  US imperialism wishes to stave off the internal economic crisis and beat international competition by extending its complete monopoly of oil to recreate the pre-1973 conditions of cheap oil imports.  As a consequence, US imperialism is setting up a ring of bases to control the Middle-East and Central Asia.  A ring of bases; a ring of fire.  The first shot for the recolonisation of the Middle-East was fired when US imperialism declared its dirty war on Iraq in 1991.  This celebration of the end of the Cold-War in a medieval ritual of blood was accompanied by a policy of deliberately starving to death 1.3 million Iraqi citizens.  Today, the US is preparing for another war on the Iraqi people.  The attacks on Yugoslavia and Afghanistan are part of a pincer movement from the West and East to militarily dominate the region and monopolise the oil of Central Asia.  The massacres of the defenceless Yugoslav and Afghan people merely constitute “collateral damage”.  In fact, they are “collateral damage” in the struggle to set up a ring of fire to dominate Central Asia for oil.  These unprecedented crimes against innocent people will not be forgotten, not for a thousand years.  In Pakistan, Afghanistan, and the Middle-East, US imperialism has set up a massive presence of 80,000 troops.  In Palestine US imperialism continues its most disgraceful policy of supporting a racist settler colonial state to police the Arab people.  The open genocide of the Palestinian people at the hands of the terrorist Ariel Sharon has raised no more than token protests by world governments.  In Palestine, imperialism has decided that the Palestinians are unnecessary, surplus, superfluous, all the governments of the world are prepared to accept their extermination.  But the Palestinian people have decided that they will not be exterminated.  And therein the Palestinian people have sealed the fate of imperialism in the Middle-East.

The imperialists have decided to mete out ‘collective punishment’ to all the nations of the oppressed world.  US imperialists will undoubtedly discover that the oppressed people of the world are unwilling to be subdued under their military boots.  US imperialism is the biggest enemy of all the oppressed people of the world.

Within the anti-imperialist camp, however, there are several class forces in the field of struggle. Primarily, communists must be able to contend with the national bourgeoisie.

Marxian dialectics teaches us that every class rises, reaches its revolutionary peak, and then passes into history as a conservative and backward force.  Take the example of the bourgeoisie in the West.  This class was a rising class in the 16^th century.  The French revolution of 1789 was the high point of its revolutionary activity.  After the upheavals of 1848 it became conservative, reactionary, and counter-revolutionary.  1848 marked the date of the death of the “revolutionary bourgeoisie” of Europe.  Hitherto, the bourgeoisie of Europe could no longer be considered a “revolutionary” class despite whatever mildly progressive role it might have played in this or that context.

The rise and fall of the national-bourgeoisie in oppressed countries is not very different from this dialectic of development.  The national-bourgeoisie was a rising class in the period of colonialism.  At the turn of the century Lenin even characterised it as a “young revolutionary class” in his article Backward Europe and Advanced Asia and in other articles written on China.  In the early 20^th century this class rose to revolutionary maturity and in most cases was able to gain the leadership of the anti-colonial struggle.  At the time, this class mobilised the people, called them to arms, and filled the oppressed people with energy for independence.  In China this class was represented by Sun Yat Sen and the Nationalist Party.  In India, to a much less revolutionary extent, it was represented by the Congress Party.  In Indonesia it was represented by Sukarno.  In Africa it was represented by Kwame Nkhruma and the pan-Africanists.  In Arab countries it was represented by Gamal Abdul Nasir and the pan-Arabists.  In all of these cases, with obvious certain modifications, the essential program of the national bourgeoisie can be characterised by the following four demands.

1)    Bourgeois Democratic Republic

2)    Some semblance of a land reform

3)    Democratic freedoms (freedom of press, assembly, organisation and so on)

4)    Some form of State intervention in welfare and development of infrastructure

All these transformations, though extremely significant in a colonial context, remain firmly within the bourgeois-democratic framework and help to consolidate capitalism on a democratic footing.  The struggle for democracy is extremely important for the workers, but the struggle for democracy must never be confused with the struggle for socialism.  Furthermore, the path of opportunism with respect to the oppressed world has rested on preventing the proletariat from developing the ideological, political, and organisational conditions necessary for the leadership of the anti-imperialist struggle.  Even where the proletariat and its party are extremely small, they can and must try to capture the leadership of the anti-imperialist movement.

Even as far back as the 1920s, Lenin spoke of a rapprochement between the bourgeoisie of the oppressed countries and imperialism.  On this basis he differentiated between the reformist “bourgeois-democratic movement” and the “national-revolutionary movement” (the term national-liberation struggle is premised on this distinction).  Thus, Lenin wrote:

There has been a certain rapprochement between the bourgeoisie of the exploiting countries and that of the colonies, so that very often -- perhaps even in most cases -- the bourgeoisie of the oppressed countries, while it does support the national movement, is in full accord with the imperialist bourgeoisie, i.e., joins forces with it against all revolutionary movements and revolutionary classes.

In light of this rapprochement Lenin advised that,

We, as Communists, should and will support bourgeois-liberation movements in the colonies only when they are genuinely revolutionary, and when their exponents do not hinder our work of educating and organising in a revolutionary spirit the peasantry and the masses of the exploited. If these conditions do not exist, the Communists in these countries must combat the reformist bourgeoisie...

What is the character of the national-bourgeoisie in the oppressed countries today?  Can we consider the national-bourgeoisie as a “revolutionary” class today?  For example, does this class allow the communists to proceed with the work of organising in a revolutionary spirit the proletariat, peasantry, and masses of the exploited?  To that question the answer must be an unequivocal NO!  This assertion, of course, is a generalisation about the historic role of the national bourgeoisie and does not preclude the possibility of certain exceptions where it is still playing a relatively revolutionary role.

In fact, the overthrow of an entire series of national-revolutionary leaders, Kwame Nkhruma in Ghana, Patrice Lumuba in Congo, Sukarno in Indonesia, Arbenz in Guatemala, in and around the 1950s and 1960s signalled the beginning of the end of the revolutionary epoch of the national-bourgeoisie.  If this thesis was still unacceptable in the 1960s, it became even more stark in the 1970s.  In India the brutality with which the state crushed the CPI(ML); in Pakistan the severe repression of the workers movement in 1973; in Egypt the capitulation of Ahmed Sadaat to Zionist imperialism; all these acts were indicative of the transformation of the role of the national-bourgeoisie in the oppressed world. 

In the 1980s and 1990s the world witnessed the complete capitulation of this class to the wholesale robbery of the oppressed world in the name of the Structural Adjustment Policy.  No more than a whimper of protest came out from the national-bourgeoisie.  Among other factors, it was precisely the political vacuum created by the demise of this class as a revolutionary force that led to the rise of religious fundamentalism in many parts of the world (for example the BJP in India, the fundamentalists in Iran, Pakistan, Afghanistan, and the Middle-East).  This collapse of the national-bourgeoisie also coincided with the destruction of the socialist bloc by revisionism and the new aggressive ‘cut-throat’ capitalism by imperialism.  These factors combined to produce the lowest and most reactionary period in the history of the 20^th century.

If it is accepted that the national-bourgeoisie is no longer a “revolutionary class” how does this change our strategy and tactics for the Peoples Democratic Revolution?

This thesis implies that the objective forces in favour of a Peoples Democratic revolution have in fact matured.  This conclusion is based on the argument that till such time as the national-bourgeoisie continues to play a “revolutionary” role it is extremely difficult for the proletarian forces to wrest from them the mantle of political leadership of all the oppressed and exploited people in a colony.  However, when the national-bourgeoisie has ceased to play a revolutionary role, the contradictions between this class and the mass of the exploited people grows larger and more acute. 

Our conclusion from this discussion of the transformation in the role of the national-bourgeoisie suggests that the objective conditions are more than appropriate, perhaps even over-ripe, for the proletariat and its vanguard party to wrest the leadership of the anti-imperialist movement.  Therefore, they must advance the following slogan in the context of their nationally peculiar circumstances.

1)    Workers and peasants power

2)    Comprehensive Land reform

3)    Democratic Freedoms (freedom of press, assembly, organisation and so on)

4)    The construction of a planned economy.

The old strategic slogans of bourgeois democracy are totally unable to energise, animate, inspire, or mobilise the masses to struggle and sacrifice.  The proletarian parties of today must not limit their struggle to democracy but must push for uninterrupted revolution; they must push for a peoples democratic revolution that brings the proletariat in alliance with the peasantry to power. In conclusion, we must stress and explain to people that only the proletariat in alliance with the peasantry led by a Marxist-Leninist party can complete the tasks of the anti-imperialist struggle.

The three principle contradictions that confront the working-class movement on the world stage—that is, the contradiction between labour and capital, the contradiction between the imperialists, and the contradiction between the oppressed people and imperialism—are calling forth the Marxist-Leninist revolutionary parties for determined and decisive action on the world stage.

Bibliography

Brar, Harpal (1997) Imperialism – decadent, parasitic, moribund capitalism Harpal Brar Publications

Hirst, Paul; Thompson, Grahame (1996) Globalization in Question Polity Press.

V. I. Lenin Preliminary Draft Theses on the National and the Colonial Questions for the Second Congress of the Communist International, Collected Works, 4th English Edition, Progress Publishers, Moscow, 1966 Vol. 31, pp. 144-51.